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Manitowoc Crane (B). Manitowoc Crane (U.S.) exports heavy crane equipment to several Chinese dock facilities. Sales are currently 16,000 units per year at the yuan

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Manitowoc Crane (B). Manitowoc Crane (U.S.) exports heavy crane equipment to several Chinese dock facilities. Sales are currently 16,000 units per year at the yuan equivalent of $26,000 each. The Chinese yuan (renminbi) has been trading at Yuan 8.40/8, but a Hong Kong advisory service predicts the renminbi will drop in value next week to Yuan0.10/, after which it will remain unchanged for at least a decade. Accepting this forecast as given, Manitowoc Crane faces a pricing decision in the face of the impending devaluation. It may other (1) maintain the same yuan price and in effect soll for fower dollars, in which case Chinese volume will not change, or (2) maintain the same doltar price, raise the yuan price in China to offset the devaluation, and experience a 10% drop in unit volume. Direct costs are 75% of the U.S. sales price Additionally, financial management believes that if it maintains the same yuan sales price, volume will increase at 10% per annum through year eight. Dollar costs will not change. At the end of 8 years, Manitowoc's patent expires and it will no longer export to China. After the yuan is devalued to Yuan9.10$, no further devaluations are expected. If Manitowoc Crane raises the yuan price so as to maintain its dollar price, volume will increase at only 1% per annum through year oight, starting from the lower initial bate of 14,400 units. Again, dollar costs will not change, and at the end of eight years Manitowoc Crane will stop exporting to China, Manitowoc's weighted average cost of capital in 14%. Given these considerations, what should be Manitowoc's pricing policy? CASE 1 If Manitowoc Crane maintains the same yuan price and in effect oils for fewer dollars, the annual salon price per unit is equal to ($26.000 x Yuan. 2015) Yuand.1018 $24,000. The direct cost per unit is 75% of the salon, or $20,000 0.76 $18,600. Calculate the gross proto for years through 4 in the following table: (Round to the nearest dollar) Year 2 Years Year 4 Year 1 16,000 24,000 $ 5 24,000 $ 24,000 $ 24,000 Case 1 Sales volume (units) Sales prion per unit Total salos revenue Dired cost per unit Total direct costs Gross profits 5 19.500 5 19.500 19,500 5 10,500

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